Sequester, state rejection of Obamacare will cost Pardee millions

Published: Thursday, February 28, 2013 at 4:30 a.m.

Last Modified: Wednesday, February 27, 2013 at 12:51 p.m.

Across-the-board federal cuts known as “sequestration” would cost Pardee Hospital over $1 million annually in lost federal dollars, CEO Jay Kirby told the Henderson County Republican Men’s Club Wednesday.

But that’s nothing compared to the loss the hospital will face if North Carolina rejects a Medicaid expansion offered by the feds, Kirby said.

A bill approved Tuesday by lawmakers barring the state from expanding Medicaid under the Affordable Care Act, often called “Obamacare,” would prevent Pardee from offsetting $54 million in Medicare cuts over 10 years, Kirby said.

That would make it even harder for the hospital to stay profitable, faced as it is with growing competition, rising costs and regulations requiring they treat everyone who walks through the door, which cost them $10.1 million in unreimbursed care in 2011.

Last year, the hospital’s bottom line was “$600,000 on net operating margin,” Kirby said, or a .6 percent margin. Pardee stays afloat, he said, largely thanks to $2 million from the hospital’s foundation, good stewardship by its board of trustees and returns on investments.

“I think not expanding Medicaid just pours gas on the fire of Pardee Hospital,” he said. “There’s no easy way around it. I don’t understand the pressures and dilemmas and everything that Sen. Apodaca and Rep. McGrady and (Gov. Pat) McCrory face. I can only tell you the pressures Pardee Hospital sees.”

Kirby offered the Republican audience a graph showing where Pardee got its 2012 revenue of $143 million — 70 percent came from Medicare and Medicaid, 23 percent from commercial insurance and 7 percent from customers who were uninsured.

Currently, the only revenue source that fully covers the cost of delivering care is commercial insurance, Kirby said.

“You wonder why it was volatile, Pardee Hospital going into Fletcher, North Carolina and building a building with Mission Hospital? Because 61 percent of the people in the Fletcher zip code have commercial insurance,” Kirby said, adding that all hospitals must attract privately insured patients to offset Medicare, Medicaid and uninsured patients.

Impacts of sequestration

Come March 1, Kirby said, Pardee will receive $90,000 less a month from the federal government if sequestration kicks in.

“Do you think that’s going to have an impact on the (1,300) men and women who work at Pardee? Uh-huh. Do you think that’s going to have an impact on you when you seek services at Pardee, or Park Ridge, or Mission, or Polk or Transylvania? Absolutely; they’re all getting less.”

If McCrory lives up to his pledge to sign the bill approved Tuesday rejecting Medicaid expansion, the financial squeeze on Pardee will get tighter, Kirby said.

“We expected the federal government to cut that $54 million over 10 years, but we also expected the state — as most states — would sign on to Medicaid and up what’s being covered for uninsured and balance that out,” he said. “Doesn’t look like that’s going to happen. So that $54 million, as soon as the governor signs it, becomes very real to me.”

Kirby said Henderson County is “blessed” to be represented by Apodaca and McGrady and acknowledged the pressures they face in keeping the state’s finances under control “are probably much greater than mine.” But to protect Pardee’s profitability long-term, Kirby believes health care reform is necessary.

“I don’t care whether you’re Democrat or Republican,” Kirby said. “I know where this group sits, but this is about insurance reform. The commercial (insurers) not paying the note for everybody else. Medicare, Medicaid paying a fair share. Hospitals not charging fees that are exorbitant, so we have a piece of this.”

About 500,000 low-income North Carolinians would qualify for government health insurance under the Affordable Care Act, Kirby said. That’s 500,000 currently uninsured residents whose burden is now “cost-shifted” to those paying private insurance premiums and hospital emergency rooms.

“When we care for them, we’re shifting it to commercial providers,” Kirby said. “It’s a tax that business pays because Medicare and Medicaid aren’t doing it.”

Business has already figured that out and has begun cutting insurance benefits and costs, he said. Lowes sends it insured employees to Cleveland Clinic for cardiac care rather than Mission or Duke to save money; Delta sends its heart patients to London “because it’s that much cheaper.”

“So reform has to happen,” Kirby said. “It will happen. I know, at the end of the day, the folks in Raleigh will make the best decision for the state of North Carolina, period. But at the end of the day, I’ll need to recommend the best decision for Pardee Hospital and hopefully in between, we can mitigate some of the challenges.”

<p>Across-the-board federal cuts known as “sequestration” would cost Pardee Hospital over $1 million annually in lost federal dollars, CEO Jay Kirby told the Henderson County Republican Men's Club Wednesday. </p><p>But that's nothing compared to the loss the hospital will face if North Carolina rejects a Medicaid expansion offered by the feds, Kirby said.</p><p>A bill approved Tuesday by lawmakers barring the state from expanding Medicaid under the Affordable Care Act, often called “Obamacare,” would prevent Pardee from offsetting $54 million in Medicare cuts over 10 years, Kirby said.</p><p>That would make it even harder for the hospital to stay profitable, faced as it is with growing competition, rising costs and regulations requiring they treat everyone who walks through the door, which cost them $10.1 million in unreimbursed care in 2011.</p><p>Last year, the hospital's bottom line was “$600,000 on net operating margin,” Kirby said, or a .6 percent margin. Pardee stays afloat, he said, largely thanks to $2 million from the hospital's foundation, good stewardship by its board of trustees and returns on investments.</p><p>“I think not expanding Medicaid just pours gas on the fire of Pardee Hospital,” he said. “There's no easy way around it. I don't understand the pressures and dilemmas and everything that Sen. Apodaca and Rep. McGrady and (Gov. Pat) McCrory face. I can only tell you the pressures Pardee Hospital sees.”</p><p>Kirby offered the Republican audience a graph showing where Pardee got its 2012 revenue of $143 million — 70 percent came from Medicare and Medicaid, 23 percent from commercial insurance and 7 percent from customers who were uninsured. </p><p>“Some will say we're headed toward socialized medicine and a federal single-source payer,” Kirby said. “I will tell you, from Pardee's perspective, we're already there.”</p><p>Currently, the only revenue source that fully covers the cost of delivering care is commercial insurance, Kirby said. </p><p>“You wonder why it was volatile, Pardee Hospital going into Fletcher, North Carolina and building a building with Mission Hospital? Because 61 percent of the people in the Fletcher zip code have commercial insurance,” Kirby said, adding that all hospitals must attract privately insured patients to offset Medicare, Medicaid and uninsured patients.</p><p><b>Impacts of sequestration</b></p><p>Come March 1, Kirby said, Pardee will receive $90,000 less a month from the federal government if sequestration kicks in. </p><p>“Do you think that's going to have an impact on the (1,300) men and women who work at Pardee? Uh-huh. Do you think that's going to have an impact on you when you seek services at Pardee, or Park Ridge, or Mission, or Polk or Transylvania? Absolutely; they're all getting less.”</p><p>If McCrory lives up to his pledge to sign the bill approved Tuesday rejecting Medicaid expansion, the financial squeeze on Pardee will get tighter, Kirby said.</p><p>“We expected the federal government to cut that $54 million over 10 years, but we also expected the state — as most states — would sign on to Medicaid and up what's being covered for uninsured and balance that out,” he said. “Doesn't look like that's going to happen. So that $54 million, as soon as the governor signs it, becomes very real to me.”</p><p>Kirby said Henderson County is “blessed” to be represented by Apodaca and McGrady and acknowledged the pressures they face in keeping the state's finances under control “are probably much greater than mine.” But to protect Pardee's profitability long-term, Kirby believes health care reform is necessary. </p><p>“I don't care whether you're Democrat or Republican,” Kirby said. “I know where this group sits, but this is about insurance reform. The commercial (insurers) not paying the note for everybody else. Medicare, Medicaid paying a fair share. Hospitals not charging fees that are exorbitant, so we have a piece of this.”</p><p>About 500,000 low-income North Carolinians would qualify for government health insurance under the Affordable Care Act, Kirby said. That's 500,000 currently uninsured residents whose burden is now “cost-shifted” to those paying private insurance premiums and hospital emergency rooms.</p><p>“When we care for them, we're shifting it to commercial providers,” Kirby said. “It's a tax that business pays because Medicare and Medicaid aren't doing it.”</p><p>Business has already figured that out and has begun cutting insurance benefits and costs, he said. Lowes sends it insured employees to Cleveland Clinic for cardiac care rather than Mission or Duke to save money; Delta sends its heart patients to London “because it's that much cheaper.”</p><p>“So reform has to happen,” Kirby said. “It will happen. I know, at the end of the day, the folks in Raleigh will make the best decision for the state of North Carolina, period. But at the end of the day, I'll need to recommend the best decision for Pardee Hospital and hopefully in between, we can mitigate some of the challenges.”</p><p>Reach Axtell at 828-864-7860 or than.axtell@blueridgenow.com.</p>